Sunday, July 14, 2013
6:10:46 PM EDT

We Added Two New Candidates

by
James Brown

We added two new plays this past week with both Macy's (M) and Whole Foods (WFM) graduating from our watch list to our active play list.

Closed Plays

None. No closed plays this week.

Play Updates

Bank of America - BAC - close: 13.78

Comments: 07/14/13:
Financial stocks continued to rally last week. The XLF financial ETF closed at a new multi-year high. Meanwhile banking giants JPM and WFC both reported better than expected results on Friday. This probably boosted shares of BAC, which added +1.99% on Friday. It will be BAC's turn to report earnings on July 17th, before the opening bell.

Currently our stop loss is at $11.35, which is below the simple 200-dma. More conservative investors may want to raise their stop higher since BAC could see a big drop if the company disappoints with its earnings results.

Current Target:$ 59.00
Current Stop loss: 44.65
Play Entered on: 06/21/13
Originally listed on the Watch List: 05/25/13

Ford Motor Co. - F - close: 17.11

Comments: 07/14/13:
Ford spent a few days consolidating sideways in the $16.50-17.00 zone but finally broke out past $17.00 on Friday. The stock is up significantly from its late June lows. The trend is obviously up but Ford has become overbought here.
We should expect some profit taking between now and the end of the month. Ford reports earnings on July 24th. Shares could see a pullback after the announcement. Look for likely support near $16.00 and near the 50-dma.

Current Target:$ 17.75
Current Stop loss: 14.25
Play Entered on: 04/29/13
Originally listed on the Watch List: 04/20/13

Honeywell Intl. - HON - close: 82.37

Comments: 07/14/13:
HON rallied more than $2 last week to hit new all-time highs. More importantly shares have broken out from their $76-$81 trading range. The stock is poised for the next leg higher. However, HON is scheduled to report earnings on July 19th. The results come out before the opening bell. Analysts are expecting a profit of $1.21 a share. If HON disappoints or issues guidance that is too cautious it could short circuit the rally.

Current Target:$ 95.00
Current Stop loss: 75.75
Play Entered on: 05/07/13
Originally listed on the Watch List: 05/04/13

Intel Corp. - INTC - close: 23.90

Comments: 07/14/13:
We have been expecting shares of INTC to drop toward support near $23.00. The stock actually pierced that level on Wednesday last week with a spiked down to $22.64. INTC has recovered and looks poised to keep bouncing. However, the stock's relative weakness compared to the rest of the market and the semiconductor index is disturbing.

I am still suggesting a lot of caution here. We will raise our stop loss up to $22.45. More conservative traders may want to just exit early now instead. There are probably better candidates out there for our capital.

Please note that INTC is scheduled to report earnings on July 17th. The results come out after the closing bell. Wall Street expects a profit of 40 cents a share.

Earlier Comments:
We want to exit our 2014 calls when INTC hits $26.50. We will plan to exit our 2015 calls at $28.00.

Comments: 07/14/13:
The rally in JPM continued last week. Shares are up three weeks in a row. It's not a surprise to see JPM stall just under its May highs with resistance near $56.00 as investors waiting for the company's earnings report.

JPM announced Q2 earnings on Friday morning. Analysts were looking for $1.44 a share. The company delivered $1.60 a share. Revenues also beat estimates at $25.21 billion for the quarter. It looks like a strong quarter but these results also reflect $1.5 billion in loan loss reserves that JPM has "released". The company was relatively optimistic about the rest of the year but CEO Jamie Dimon stressed concern about the future for mortgage lending given the sharp rise in bond yields (and thus mortgage rates).

A little post-earnings pullback here would be normal. Yet if JPM retreats too much it will start to look like a bearish double top with a failure at the $56.00 level.

Comments: 07/14/13:
Our new watch list candidate, Macy's (M), has already graduated to our play list. The plan was to buy calls if M could close above $50.25. The stock met that requirement on Monday with a surge past resistance at the $50.00 level. The stock closed at $50.27 on July 8th. Our trade opened the next day with M gapping higher at $50.50. Unfortunately there was no follow through. Shares of M reversed in what looks like a three-day bearish reversal candlestick pattern. The stock languished on Thursday and Friday as well, which is perplexing. One potential culprit that could be influencing retail stocks is the rise in gasoline prices. Oil has surged in recent sessions and gasoline prices are poised to follow with another march higher.

Bigger picture the retailers appear to be doing well. This past week brought the June same-store sales data. Macy's doesn't provide same-store sales data on a monthly basis but the industry showed growth of +4.1% in June. That was better than the 3.5% estimate. Industry experts are also expecting the back-to-school season to show +3% growth this year.

The gasoline issue could be a problem. Last week's performance in M does look like a potential bull-trap or failed rally pattern. Therefore the best move today might be to wait for Macy's to close above $50.75 or above $51.00 before initiating new bullish positions.

Earlier Comments:
If triggered our long-term target is $59.00. More aggressive investors may want to aim higher since the point & figure chart is forecasting a $76 target.

Chart of M:
Current Target: $59.00
Current Stop loss: 47.25
Play Entered on: 07/09/13
Originally listed on the Watch List: 07/07/13

NetApp, Inc. - NTAP - close: 39.30

Comments: 07/14/13:
NTAP continues to slowly drift higher. Shares ended the week just below its mid-June highs near $39.50. I would expect the $40.00 level to short-term resistance as well. If NTAP can breakout past the $40 mark the stock could see some short covering. At the moment I would wait for a close above $40 before considering new bullish positions.

Current Target: $44.75
Current Stop loss: 34.90
Play Entered on: 05/17/13
Originally listed on the Watch List: 05/11/13

Whole Foods Market - WFM - close: 56.23

Comments: 07/14/13:
WFM was a new watch list candidate. The plan was to wait for shares to breakout from their trading range and close above $54.00. WFM flirted with a breakout past $54 on Monday but it didn't close above this level until Tuesday, July 9th. Our trade opened on Wednesday morning with WFM at $54.53. The stock has continued to rally and WFM is at new all-time highs. Yet on a short-term basis the stock actually looks overbought here. Odds are good WFM could see some profit taking. I would wait for a dip back into the $55-54 zone before considering new bullish positions.